MarketWatch: 10 Things Bars Won’t Tell You

April 11, 2013

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Source: MarketWatch

1. “The booze business may be recession-proof, but we’re not.”

When it comes to liquor, beer and wine, the thinking has always been that a bad economy equates to good sales. But what may be true for manufacturers and distributors of alcoholic beverages isn’t necessarily true for bars, since consumers may opt to save some money by sipping at home. The spirits sector, for example, saw volume growth of 1.7% and 1.4% in 2008 and 2009, respectively, according to the Distilled Spirits Council of the United States. By contrast, bars saw their revenue plummet by a cumulative total of 10% during those downturn years — from nearly $20 billion in 2007 to $17.9 billion in 2009 — according to industry researcher IbisWorld. (Even today, the business is still far from its peak: Sales for 2013 are expected to reach $19.76 billion.) In simple terms, bars reflect the recessionary economy, says IbisWorld senior analyst Nima Samadi. “Any time the market tanks, people are going to be tightening their pocketbooks,” he adds.

But what’s even more troubling for the industry is that there are a host of noneconomic factors that could also be contributing to the downturn. Alcohol consumption has been trending downward over the past three decades, going from 2.76 gallons per capita in 1980 to 2.26 gallons in 2010, according to the National Institute on Alcohol Abuse and Alcoholism. And indoor smoking bans throughout the country have had a major impact, say industry experts, since bar patrons have traditionally welcomed the opportunity to enjoy a cigarette and a sip side by side. There’s even some thought that the rise in recent years of various niche bars, from brewpubs to modern-day speakeasies, has hurt the business, since they’ve taken away from the everyday neighborhood bar that remains the cornerstone of the industry. For example, some mixology-oriented bars may not be all that welcoming to beer drinkers. The specialization is “alienating so many people,” says Steve Calabro, a bartending authority and creator of the Bartending Bootcamp website.

Still, some bars say they not only have survived the rough economic times of the past few years, but have also done very, very well. And more than a few bars have opened to great success during the period. Take Cowboy’s Saloon, a Western-themed bar in Davie, Fla., that opened in 2011. “In our first year, we topped over $3 million in revenue,” says owner Anthony Perera, adding that sales are still going strong. What’s behind some bars’ success? Here’s one possible explanation...